Chavez Currency Policy Impacts Venezuela

Published 7:00 pm, Wednesday, February 12, 2003

Morela Manganelli is worried about getting medicine for the more than 850 kids being treated at the National Foundation of Friends of Children With Cancer.

It's not a lack of funds, says Manganelli, the foundation's spokeswoman. It's a lack of U.S. dollars.

President Hugo Chavez suspended dollar sales Jan. 22 to stop a drastic devaluation of the Venezuelan bolivar. Dollar sales will resume in March, once a fixed-rate exchange scheme is hammered out, Chavez says.

That's of little comfort to Manganelli, who says the foundation has a one-month supply of imported medicine left.

"We have to buy (medicines) with dollars, and we're having serious problems with imports because of the new policy. The situation is critical," she said.

Thousands of businesses and thousands more citizens are struggling in this import-dependent nation, which just emerged from a two-month strike against Chavez that devastated the economy.

Venezuela imports 60 percent of its food, most medicines, essential manufacturing inputs and almost all finished goods. Dollars must pay for those imports.

Chavez imposed the temporary ban to foil what he called an "economic coup," including capital flight and panic dollar buying, precipitated by the strike. The strike ended Feb. 4.

"Not one more dollar for coup plotters!" he declares repeatedly, vowing to use his control over money to bankrupt his political enemies, including many in the private sector.

"We have defeated the conspirators, terrorists and coup plotters, but we must remain alert," Chavez asserted during a speech to hundreds of soldiers and supporters on Wednesday.

Government adversaries accuse the paratrooper-turned-president of using the policy to help establish a Cuban-style dictatorship.

Under the policy, a government committee appointed by Chavez will determine who gets the dollars and who doesn't.

All dollar-seekers, individuals and businesses alike, must register with the government. Chavez says priority will be given to those importing food and medicine.

It could take several weeks for the committee to get to work. After that, dollar requests can take up to 45 days to process.

"It's totally strangling the economy," said Jose Pineda, chief economist for the Venezuelan American Chamber of Commerce and Industry, which represents over 1,000 businesses.

"Most businesses have an average of 30 percent of normal inventories and these are falling every day because of the slowdown caused by the import problem," said Pineda.

Banks are denying access to transfers from abroad until the government issues its regulations. As a result, many businesses that depend on those transfers are laying off workers despite a government ban on firings designed to keep unemployment down.

Venezuela's Labor Ministry has received more than 30,000 complaints from workers laid off since December. Analysts expect the number of jobless to swell enormously from its official rate of 17 percent.

According to the Fedeindustria business chamber, strike fallout and continuing recession will cost 200,000 jobs and close more than 20,000 small- and medium-sized businesses by August.

More than half of Venezuelans work in the so-called "informal sector," hawking wares on sidewalks, shining shoes or baking homemade cakes sold to motorists in traffic jams.

At the non-profit cancer center, Manganelli says patients who miss one month of treatment lose benefits gained over the course of two years. "They start from zero," she said.

All sorts of imported drugs are increasingly scarce, said Douglas Natera, president of the Venezuelan Medical Federation, which represents public hospital employees.

"There's medicine to last two weeks. If that's used and more supplies don't arrive, hospitals will have to be closed," Natera said.

Even business travelers will have new, and stringent, rules to live by. The rules will restrict trips abroad for business representatives and set limits on how much dollars travelers can obtain to take abroad.

"There are no longer any dollars for the happy travelers," Chavez said.

Chavez announced Feb. 6 that each dollar will cost 1,598 bolivars _ far below the currency's real value. Black market trading puts the bolivar as high as 2,500 per dollar.

Inflation is rising because Venezuelans are paying more to buy dollars. Shopkeepers, in turn, must charge more for their products.

To brake rising prices, the government slapped price controls on more than 220 basic goods ranging from powdered milk to beef and rice. But Venezuela's consumer protection agency is understaffed and incapable of enforcing the controls.